Stop Loss Procedures Updated!
Put Sale
Cash secured or not, put sales are subject to large tail losses, that is, extreme losses with low probability. The worst case is the underlying going to zero.
The stop loss procedure for put sales is to close the trade if the loss taken exceeds three times the premium paid. If the strike date is far away, the urgency to act is a little less. As the strike date nears, do not hesitate to prune the losers.
Call Sale
Uncovered call sales, treat the same as put sales.
If a covered call sale goes up past the strike price, you can wait it out and take the sale. This action converts a position into cash.